Once I showed the hidden forlders and then added that folder to my locations for document libraries, I was able at least have it included in windows explorer. However, I still cannot get the following to work as it did in XP:
Inserting a file in outlook and clicking on the link to the "recent items" folder and I am told that I "don't have permission to open this file" (but I can use that folder through windows explorer).
Also in Word and Excel when I want to open a file through that menu, the recent items folder does not show up.